It has been brought to
the notice of the Board that some manufacturers of Motor Vehicles are
getting complete Motor Vehicles manufactured by sending the Chassis
of the Motor Vehicles to independent body builders for building the
body as per the design/specification of the manufacturer. The
practice followed is that the Chassis is transferred to the Body
builder on payment of appropriate Central Excise duty on stock
transfer basis and is not sold to them. The body builder
avails the Cenvat Credit of the duty paid on the chassis and clears
the same on payment of duty to the Depot/Sales Office/Distributer of
the Motor Vehicle manufacturer. The duty is discharged by the body
builder on the assessable value comprising the value of Chassis and
the job charges. The Depot/Sales office of the MV manufacturer sells
the vehicles at a higher price than the price on which duty has been
paid. Similar practice may be prevailing in respect of other
commodities also.

2. The
matter has been examined. Rule 10A (ii) of the Central Excise
Valuation (Determination of Price of Excisable Goods) Rules, 2000
stipulates that where the excisable goods are produced or
manufactured by a job-worker, on behalf of a principal manufacturer,
then in a case where the goods are not sold by the principal
manufacturer at the time of removal of goods from the factory of the
job-worker, but are transferred to some other place from where the
said goods are to be sold after their clearance from the factory of
job-worker, and where the principal manufacturer and buyer of the
goods are not related, and the price is the sole consideration for
the sale, the value of the excisable goods shall be the normal
transaction value of such goods sold from such other place at or
about the same time.

3. A
plain reading of the aforesaid provision of law makes it clear that
the assessable value for the purpose of charging Central Excise duty,
in the cases where the Job-worker transfer the excisable goods to the
Depot/Sale office/Distributer and/or any other sale point of the
principal manufacturer, shall be the transaction value on which goods
are sold by the principal manufacturer from such a place.
Accordingly, after the insertion of Rule 10 A, the practice of
discharging the duty on cost construction method by the body builder
is not legally correct. It is, therefore, clarified that wherever
goods are manufactured by a person on job work basis on behalf of a
principal, then value for the purpose of payment of excise duty may
be determined in terms of the provisions of Rule 10 A of the Central
Excise Valuation (Determination of price of Excisable goods) Rules,
2000 subject to fulfilment of the requirements of the said rule. It
is requested that the practice followed in your zone may be verified
for body builders of motor vehicles and/or other commodities, which
are manufactured on job work basis to ensure that duty is paid
correctly as per Rule 10A wherever required.